APICS News

Auto Sales Strong in 2013, but Lower Demand Expected

By APICS staff | 14 | 1 | January 07, 2014

An improving economy led to some of the best US auto sales in six years, but analysts caution that demand may fall in 2014, the Associated Press reports. Sales grew 8 percent to 15.6 million vehicles in 2013, due in part to a surge in pickup trucks in the home construction and energy industries.

However, sluggish December sales may point to an inevitable slowdown as many customers have already bought new cars, and today’s cars last longer than before. Also, many families are less likely to buy extra cars in current employment conditions. “Automakers have invested so much to be so competitive and segment growth just isn’t there. They’re going to have to get creative,” says Alec Gutierrez, senior analyst for Kelley Blue Book. He adds that sales are approaching a natural level of demand and people travel fewer miles than they used to.

“We are in what we believe are the final stages of the recovery, which naturally leads to slower growth rates,” says Jeff Schuster, vice president at consultancy LMC Automotive. He expects sales to grow only 1 to 2 percent through 2015.

Automakers may turn to offering more and higher discounts to help boost sales in 2014 after limiting many incentives in 2013, the Associated Press reports.

Bangladesh Factory Fund Created, but Some Refuse to Pay

Last April, the Rana Plaza factory complex in Dhaka, Bangladesh, collapsed, killing more than 1,100 people in the deadliest disaster in the history of the garment industry. In response to international pressure, four clothing brands—Primark, Loblaw, Bonmarche, and El Corte Ingles—recently agreed to help finance a $40 million compensation fund for the victims and their families. However, many brands refused to participate. The New York Times investigates one of these companies, Spanish clothier Mango, and why it so far has refused to contribute.

Mango’s position is it had not formalized a business relationship with Phantom Tac, the supplier that operated in Dhaka. According to company representatives, Mango was still conducting inspections and audits at Phantom Tac and was awaiting samples for a 25,000-unit order. However, the Times investigation reveals that production of samples had already begun and workers were urged to produce Mango products quickly so they could begin receiving more orders.

Now, Phantom Tac’s Spanish cofounder, David Mayor, has disappeared, and Bangladeshi Aminul Islam has been arrested for his role in the collapse. The company was founded to be a socially responsible company, but the Times reports that pressures to meet deadlines and make money put social goals out of reach. The company lost orders from Inditex, owner of Zara, in the previous year due to failing social compliance audits and underage workers discovered there.

Critics say Mango’s explanation for refusing to participate in the compensation fund is unconvincing and other brands need to come forward if full funding is to be achieved. “Definitely, [Mango] should contribute to the fund,” says Eva Kreisler of Spanish advocacy group Clean Clothes Campaign. “It is quite shameful that they still won’t contribute to bring justice to the workers.”

Indian Drugmakers Surge in Production Despite Quality Concerns

India has long produced the raw materials and active ingredients to supply other companies that produce the finished medicines. However, the Financial Times reports, India now is producing about as much medicine for the United Kingdom as that made within the nation itself, demonstrating Asia’s growing influence in the global pharmaceutical market.

India is far ahead of all other foreign producers in Britain, manufacturing about 25 percent of all medicines consumed there. This has raised some concerns over quality. In recent months, two large Indian generic drug manufacturers received import bans in the United States and United Kingdom on some products following ingredient tests.

However, the number of problems identified by Indian regulators is proportional to the volume of medicine produced, says Gerald Heddell, director of inspections, enforcement, and standards at the UK Medicines and Healthcare Products Regulatory Agency. “When we look back over 110 inspections we conducted over the last two years in India, we had significant concerns with 9 or 10 companies,” he says. “That does not represent a statistically higher proportion than in other parts of the world. India stands out because it is just such a big supplier.”

Arun Sawhney, chief executive of Ranbaxy, an Indian company that had some of its products banned in the United States, is eager to work with regulators to meet US requirements. “The global pharmaceutical landscape is changing and we have to change with it,” he says. “Clearly, we have to continue to raise the standards of our processes to be ahead of these changes.”

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